Question

Suppose you invest $2250 in a D that earns 3% APR and is compounded monthly. The Cd matures in 2 years. How much will this CD be worth at maturity?

Answer 1

$2388.95

Explanation:

• Principal, P= $2250
• Annual Interest Rate, r= 3% =0.03
• Time, n= 2 years
• Since it is compounded monthly, Period, k= 12 Months

The worth of a compound deposit after a period of n years is calculated using the formula:

`A(n)=P(1+(r)/(k))^(nk)`

`A(2)=2250(1+(0.03)/(12))^(12 * 2)\\\\=2250(1+0.0025)^(24)\\=2250(1.0025)^(24)\\=\$2388.95`

At maturity, the deposit will be worth $2388.95.